Yesterday, there were several entry points. Now, let's look at the 5-minute chart and figure out what actually happened. In my morning article. In my morning article, I turned your attention to 1.0821 and recommended making decisions with this level in focus. A breakout and an upward retest of this level took place, which led to a sell signal. As a result, the pair dropped by more than 35 pips. Bulls managed to defend the support level of 1.0786 in the afternoon, which gave a buy signal. However, a major upward movement did not occur.
When to open long positions on EUR/USD:
The bearish pressure on the euro persisted due to strong US labor market data. The US dollar, on the contrary, rose. It appears that the Fed is likely to stick to monetary tightening. For the second week in a row, the euro has been falling without any significant correction. Today, a steady correction may start. In the morning, Germany's Producer Price Index and the economic bulletin from the ECB are on tap. However, traders are awaiting the speeches of ECB Executive Board Member Isabelle Schnabel and ECB President Christine Lagarde. They could shed light on the ECB's future plans for monetary policy.
If they do not provide any specific information, I would advise you not to open long positions even at the current lows. In my opinion, it is better to go long at the support level of 1.0748, which also acts as a new monthly low. A false breakout of this level will indicate the presence of bulls who are willing to push the euro up at the end of the week. It will provide new entry points into long positions. The pair is likely to grow to the resistance level of 1.0786 where the moving averages are passing in negative territory. Only a breakout and a downward retest of this level after the statements of the ECB policymakers could boost demand for the euro. It could give a new entry point into long positions. The pair has a chance to advance to a high of 1.0821. A more distant target will be the 1.0861 level where I recommend locking in profits.
If EUR/USD declines and bulls show no activity at 1.0748, which is quite likely in such a bear market, the euro could drop lower. Therefore, only a false breakout of the support level of 1.0716 will give new entry points into long positions. You could buy EUR/USD at a bounce from 1.0674, keeping in mind an upward intraday correction of 30-35 pips.
When to open short positions on EUR/USD:
Bears continue to control the market. Thus, the pair is sliding to weekly lows every day. A false breakout of this level will lead to a sell signal that may push the pair to a new monthly low of 1.0748. Consolidation below this level as well as an upward retest could trigger a decline to 1.0716. A more distant target will be the 1.0674 level where I recommend locking in profits.
If EUR/USD rises during the European session and bears show no energy at 1.0786, which is likely amid hawkish statements from ECB officials, bulls will try to return to the market. In this case, I would advise you to postpone short positions until a false breakout of 1.0821. You could sell EUR/USD at a bounce from 1.0861, keeping in mind a downward intraday correction of 30-35 pips.
COT report
According to the COT report (Commitment of Traders) for May 9, there was a rise in long and short positions. This report takes into account the changes that have taken place in the market after the Fed and ECB meetings. The majority of traders are increasing long positions on the euro. A new downward correction which already occurred last week will provide a buy signal. The euro needs new strong drivers to start a correction. Given that there are no important reports this week and only a few speeches from Fed officials, the pressure on the pair may continue. The COT report indicates that long non-commercial positions jumped by 13,503 to 260,335, while short non-commercial positions advanced by 7,570 to 80,913. At the end of the week, the total non-commercial net position increased to 179,422 against 173,489 a week earlier. The weekly closing price declined to 1.0992 against 1.1031.
Indicators' signals:
Trading is carried out below the 30 and 50 daily moving averages, which indicates a further drop.
Moving averages
Note: The period and prices of moving averages are considered by the author on the H1 (1-hour) chart and differ from the general definition of the classic daily moving averages on the daily D1 chart.
Bollinger Bands
If EUR/USD declines, the indicator's lower border at 1.0748 will serve as resistance.
Description of indicators
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked yellow on the chart.
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked green on the chart.
- MACD indicator (Moving Average Convergence/Divergence - convergence/divergence of moving averages) Quick EMA period 12. Slow EMA period to 26. SMA period 9
- Bollinger Bands (Bollinger Bands). Period 20
- Non-commercial speculative traders, such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet certain requirements.
- Long non-commercial positions represent the total long open position of non-commercial traders.
- Short non-commercial positions represent the total short open position of non-commercial traders.
- Total non-commercial net position is the difference between the short and long positions of non-commercial traders.
